John Fredriksen seals US$2Bn VLCC 'win-win' deal for Frontline and Hemen

Publicly listed Frontline announced on 8 January that it has agreed to divest eight of its oldest VLCCs, built between 2015 and 2016, with delivery to the new owner scheduled for Q1 2026.

The eight vessels are being sold for a total of US$832M. After repaying existing debt associated with the vessels, the transaction is expected to generate net cash proceeds of approximately US$486M. Frontline anticipates recording a gain of roughly US$217M to US$227M in the current quarter, depending on the delivery date of each vessel.

Acquisition of VLCC newbuildings

Simultaneously, Frontline has agreed to acquire nine latest-generation, scrubber-fitted eco VLCC newbuilding contracts from an affiliate of its largest shareholder, Hemen Holding Ltd. The aggregate purchase price is approximately US$1.2Bn.

Six of the vessels are currently under construction at Hengli Heavy Industries in China, with the remainder at CSSC’s Dalian Shipbuilding Industry Co. Deliveries are scheduled to begin this year and continue through Q2 2027.

The payment schedule is weighted toward delivery, with the largest instalments due upon each vessel’s handover. Frontline intends to finance the acquisitions using a combination of cash and long-term debt.

Win-win for Frontline, Hemen

Cavalier Shipping founder James Lightbourn told Riviera that Hemen, Mr Fredriksen’s private investment vehicle, appears to have carried out a well-timed asset play. Based on his estimates, the company originally ordered the vessels at approximately US$118M each and is now selling them to Frontline – in which it holds a 35% stake – for US$136M apiece. That represents a nominal profit of US$18M per ship, or US$162M across all nine vessels.

“It is a win-win for both parties,” Mr Lightbourn said. “Frontline renews its fleet and boosts its net asset value (NAV), thanks to the higher benchmark prices for VLCCs achieved in this deal, while Mr Fredriksen’s private fortune grows further.”

He also highlighted that the sale appears to have generated sufficient proceeds to facilitate a relatively straightforward acquisition. “This is worth noting because Hemen has historically provided bridge financing to Frontline for large-scale purchases, such as the Euronav fleet acquisition in 2023,” he explained.

Fleet growth and modernisation

Following these transactions, Frontline’s fleet will comprise 81 vessels, including 42 VLCCs, 21 Suezmaxes, and 18 LR2/Aframaxes.

Frontline chief executive Lars H Barstad described the transaction pricing as “very firm,” noting that the deals support the company’s goal of increasing VLCC exposure without adding to overall vessel supply.

“This aligns with our strategy of operating one of the most modern, cost- and fuel-efficient fleets in the market,” said Mr Barstad. “The delivery schedule is particularly attractive, falling within a period generally considered closed to newbuild orders. With this transaction, Frontline is making tangible progress toward improved fuel efficiency and reduced carbon emissions.”

DNB Carnegie, a part of DNB Bank ASA, acted as financial advisor to Frontline and has also rendered a fairness opinion in connection with the transaction.